3 Stocks Worse Than the Market

These stocks just rolled over. Can they come back?

Italy's bond sales scared investors, causing the markets to fall and putting the S&P 500 into negative territory for the year. With the Dow Jones Industrial Average up 5% year to date, and with two sessions remaining, it may just eke out a gain. So even though your stock took a nosedive, don't panic. First, let's see whether it had good reason to fall. Sometimes, panic-fueled drops can make excellent buying opportunities. Here's the latest crop of cratered stocks that could provide a possibility for profit:

Stock

CAPS Rating (out of 5)

Wednesday's Change

Molycorp(NYSE: MCP)

**

(14.1%)

Rare Element Resources(NYSE: REE)

*

(11.6%)

Parlux Fragrances(Nasdaq: PARL)

**

(9.8%)

Source: Motley Fool CAPS.

The markets tumbled 140 points yesterday, or 1.1%, so stocks that went down by even larger percentages are pretty big deals.

That's going to leave a markWhat a difference a year makes. Rare-earth element companies like Molycorp and Rare Element Resources were flying high as China imposed quotas on exports of the minerals. Although it became apparent these rocks weren't so rare after all, China was practically the world's sole producer, and with their being used in everything from advanced military technology to hybrid car batteries, the impact of the supply being cut off caused prices to soar.

It also led shares of miners to rocket higher too. But "miner" is a misnomer. Rare Element Resources and Avalon Rare Metals(NYSE: AVL) haven't even broken ground yet. A host of Chinese companies like China GengSheng Minerals and China Shen Zhou had only the most tangential relationship to rare-earth elements. Molycorp might be the closest thing to a real miner here, but even then it still has years to go before any element, rare or otherwise, reaches the surface.

While I didn't rate Molycorp on CAPS to underperform the market (goodness knows why), I did take Rare Element Resources to task for trying to capitalize on the REE fever despite its Bear Lodge project previously tapped by Molycorp, Hecla Mining(NYSE: HL), and Duval to no good outcome. Newmont Mining(NYSE: NEM) even sought gold there without success.

Now that China isn't tightening the screws on rare-earth elements anymore, and will likely eliminate them if and when these companies bring their mines on line, the miners are losing their value to investors. CAPS All-Stars tilt only slightly in favor of Molycorp being able to beat the market, while they're decidedly against Rare Element being able to do so. The stocks' low CAPS ratings, however, suggest that regardless of where the individual members stand, they think there are better places for your money.

Add Molycorp and Rare Element Resources to your watchlist to stay on top of developments coming out of China and to find out whether their mines ever end up being productive.

In the breakdown laneIt's been a few years since I've even thought about the once ethically challengedParlux Fragrances, a maker of branded perfumes from the likes of Paris Hilton and Rihanna. It lost the license to Guess?(NYSE: GES) last year. But a series of lawsuits, takeover attempts, and management changes ultimately led to the ouster of its chairman and CEO Ilia Lekach, perhaps the source of much of the fragrance maker's misfortunes.

Today he's only connected to the company as a consultant, but Lekach did get a half-million warrants when they tossed him aside, giving him the right to purchase company stock at an exercise price of $1.16 a share. So depending upon how much he still owns today, he could get a nice payday from the buyout of Parlux by Perfumania, which offered to buy the company for $4 cash per share plus 0.2 shares of Perfumania stock (or just 0.53 shares of stock).

Perfumania is controlled by the Nussbaum family, which also owns about 11% of the stock. They were instrumental in getting rid of Lekach.

CAPS member rodessa had been expecting Parlux to get bought out for several months, but was willing to wait for the payoff to come from it taking a higher profile in selling its perfumes: "Company could be bought in the coming months and the income should benefit of increasing expenses in marketing during the previous quater."

Let us know in the comments section below or on the Parlux Fragrances CAPS page whether you think it's time this saga came to an end, and be notified if and when it happens by adding it to the Fool's free portfolio tracker.

Author

Rich has been a Fool since 1998 and writing for the site since 2004. After 20 years of patrolling the mean streets of suburbia, he hung up his badge and gun to take up a pen full time.

Having made the streets safe for Truth, Justice and Krispy Kreme donuts, he now patrols the markets looking for companies he can lock up as long-term holdings in a portfolio. So follow me on Facebook and Twitter for the most important industry news in retail and consumer products and other great stories.